Back to school…back to saving for retirement
You can save with a 403(b) through your district, and if eligible, you can also open an Individual Retirement Account (IRA). Try to save as much as you can. Keep in mind that even a small amount can make a big difference over time due to compound interest. (Try out EconEd’s compound interest calculator that visually shows the dramatic effect that compounding can have on investments.)
If you wondering how much you can afford to save, use our helpful online budget sheet, which can help you maximize your savings and clarify your short- and long-term savings goals.
Make sure to fund your account. If you have a 403(b), enrolling is not enough. Be sure you’ve also filled out the appropriate Salary Reduction Agreement (SRA) so you can begin funding your account.
If you have an IRA, making automatic contributions directly from your savings or checking account will make it much easier to save. With Member Benefits, you can set up SmartPlan, or you can use payroll deduction if your district offers it.
Take the match. If your school district offers a match in your 403(b) plan, take it. It’s free money. Added bonus: The match effectively increases your income without increasing your tax bill, since you pay no taxes on matching contributions until you withdraw them in retirement.
If you’re already saving, consider increasing your contributions. A new school year is a great time to increase your 403(b) contributions by filling out a new SRA. Some employers only allow changes at the start of the school year and then again in January. Others allow more frequent changes.
Both the 403(b) and the IRA have annual contribution limits, which can change every year. Visit weabenefits.com/limits to learn more.
Enroll now. Visit weabenefits.com/enroll to open a 403(b) or IRA with Member Benefits, or give us a call and we’ll help get you back on track to saving. If you need more guidance, Member Benefits also offers a variety of financial planning services for members. Call us at 1-800-279-4030.
P.S. Your family members may be able to save, too! Call us to learn more.
Save more for your nest egg!
One secret to building financial security is to regularly pay yourself first. Instead of paying your bills and then trying to save what is left over, set money aside before you pay your bills. This way you can develop a budget around saving, and not the other way around.
Automatic payments to an IRA, such as payroll deducted contributions or automatic contributions from your checking or savings account, not only help build your savings but also make it more affordable because you are budgeting for smaller, regular amounts.
If you already have an IRA, consider giving yourself a raise. If maxing out contributions is not realistic for you right now, remember: With compound interest, even a small amount invested today can grow to a large sum by retirement. Learn more about contribution limits.
Don’t forget your family can also save with an IRA from Member Benefits! Have them give us a call at 1-800-279-4030 to enroll.
Your spouse or domestic partner, children, parents, parents-in-law, and in some cases, your grandchildren may be eligible to participate in the WEA Member Benefits IRA program. To be eligible for this program, you must meet the IRS eligibility requirements for contributing to an IRA. Restrictions may apply. Wisconsin residency required.
Keep track of your beneficiaries
While saving as much as you can for retirement is important, it’s just as important to determine the beneficiaries of your account—and keep them up to date.
Naming beneficiaries for your retirement accounts is an important first step in your estate planning. Without careful consideration, your decision may have unexpected tax and estate planning implications.
There are two basic types of beneficiaries. Primary beneficiaries are entitled to receive any undistributed assets in your account following your death. They share equally in your account unless you specify different percentages. If a beneficiary predeceases you, his or her share of your account is divided proportionately among the surviving beneficiaries.
Contingent beneficiaries are entitled to receive any undistributed assets in your account only if you have no surviving primary beneficiaries at the time of your death. If there are no surviving primary beneficiaries, your contingent beneficiaries share equally in your account unless you specify different percentages.
You may name anyone as a beneficiary of your account. Although spousal beneficiaries have the most flexibility with an inherited retirement account, for many reasons you might find it more appropriate to name someone other than your spouse as your primary or contingent beneficiary. You may also name a trust or charity, as well as other options. However, these options may have different financial consequences. Consult an attorney or tax advisor if you have questions about your beneficiary designations.
Types of accounts
The types of accounts that may require beneficiaries include:
- Retirement accounts such as a 403(b) and IRA.
- Wisconsin Retirement System (WRS) accounts.
- Other types of investment accounts, such as Member Benefits’ Personal Investment Account. Life insurance policies and health savings accounts.
- Some banks will allow you the option of naming a beneficiary on your checking account so that it passes directly to that person.
It’s important to keep your account with Member Benefits up to date as well as any other accounts you may have. When members don’t update their beneficiaries after a major life event and then pass away, those named beneficiaries can no longer be changed. If members have no beneficiaries named on their account, the account will go to their estate. Unfortunately, that can cause many issues and delays in accessing those funds if they are needed.
Be sure to name and update your account beneficiaries on all of your accounts—and make sure they match up with your estate plan as well.
Subscribe to a simple savings plan
If you’re looking for an easy solution to boost your retirement savings this year, we have one word for you: Automatic. Making contributions directly from your checking or savings account or taking advantage of payroll deduction are the easiest ways to build your IRA retirement savings with Member Benefits.
Chances are you’re already paying for other things automatically through a subscription. Do you watch shows on Netflix, Hulu, or a similar platform? Look forward to monthly boxes of prepackaged meals, beauty products, or the like? If so, you’re probably enjoying its benefits without really missing the money that’s being taken from your account every month to pay for it.
Automating your retirement savings contributions is like signing up for a subscription service to benefit the future you. It’s easy to do with Member Benefits. Just set it, forget it, and watch your retirement savings grow over time.
You have two options to choose from. Both make for smaller, easier-to-manage installments—and they are free with no additional fees.
- SmartPlan: Our popular automatic monthly payment option is a convenient and budget friendly way to make IRA contributions. Contributions are automatically drawn from either your checking or savings account.
- Payroll deduction: Payroll deduction is a convenient option in many Wisconsin public school districts. If available at your district, you can payroll deduct your IRA contributions. Just contact your business office.
Subscribe to a new savings plan—you’ll thank yourself later. Call us at 1-800-279-4030 to learn more, or visit weabenefits.com/enroll to start saving with an IRA today.
Keys to successful retirement saving
Contribute as much as you can to your savings plans as early as possible. That way, your savings have a longer time to benefit from potential investment growth—and you enhance your ability to reach your retirement goal. A delay of even a few years could cost you thousands of dollars.
Pay yourself first
One secret to building financial security is to regularly pay yourself first. Instead of paying your bills first and trying to save what is left over, set money aside before you pay your bills. This way you can develop a budget around saving, and not the other way around.
Automatic payments, such as payroll deducted contributions or automatic contributions from your checking or savings account, not only help build your savings but also make it more affordable because you are budgeting for smaller, regular amounts.
Diversify your investments
You’ve heard the old saying, “Don’t put all your eggs in one basket.” This is the basic idea behind diversification.
Putting your money in different types of investments can help you achieve a more consistent long-term performance than you would likely achieve if you put all your money in a single type of investment. In theory, when certain types of investments are declining in value, other types are gaining value.
Because some districts process adjustments to your 403(b) contributions only once or twice per year, check with your business office as to when you are allowed to make changes and plan accordingly.
Want to know more? Give us a call at 1-800-279-4030.
Sonja’s swan song
I’m retiring. Actually, by the time you read this, I will be weeks into this new phase of life.
It’s been an interesting process—this unwinding from something that has become so much a part of who I am. My decision to retire was made last February. I wanted to allow time for a smooth transition. Ten months has given me plenty of time to second-guess my decision, consider life after Member Benefits, and reflect. That reflection has been consuming.
It’s become quite clear to me that there are certain decisions we make that when we make them we don’t (can’t) really know their full impact. It’s only when you’re older that you can see their significance.
Joining Member Benefits 15 years ago was one of those decisions. Changing jobs is always a big deal, but I can point to this decision as pivotal in my personal and professional life.
Truths I have learned
I leave Member Benefits with a lot of great memories, friendships, and several truths worth sharing.
Financial literacy is a great equalizer and comes through education.
It’s not a function of age, economics, or intelligence. Being rich, or smart, or old doesn’t make you a good money manager. Studies show that those with high financial literacy plan for retirement and have double the wealth of people who do not plan for retirement.
I never thought I would be able to retire. I remember saying (glumly) in my 20s, “I’ll probably have to work until I die.” Those were the years I lived pay check to pay check—fresh out of college with student loans, low paying jobs during high unemployment, no health insurance—you get the picture. I’m sure many, if not most, of you can relate. At that age, retirement was beyond my range of vision, and while I had frugal tendencies, my grasp of financial principles was wanting.
It wasn’t until I took the position with Member Benefits that I realized how much I didn’t know and the cost of my evident illiteracy. There were a lot of ‘aha’ moments as I went about doing my job—which was heavy with reading about, talking about, and writing about financial topics.
I absorbed those nuggets of knowledge and I applied them in my own life to the best of my ability. And it empowered me to take control of my financial future. Truth: Knowledge is power.
Working for an organization that shares your values makes the years fly by, and it’s especially gratifying.
I took the job with Member Benefits because I loved the idea of serving Wisconsin public school employees. At the time, I had been looking to make a career move that fit my personal values. I entertained the idea of teaching. I even took the certification exams, but a very wise teacher (my sister) suggested that I teach Sunday School first. Well, the rest of the story is obvious. I did not have what it takes.
But it all worked out. My position at Member Benefits has allowed me to use my skills to support public education and those who serve in our schools without being in the classroom. This organization is true to its mission, and I have gone home every night for 15 years feeling like I’m contributing to something that’s important.
You all are truly amazing people and are charged with maybe the most important function in our society. I applaud all that you do, and I am honored to have been part of this in my own special way.
Surrounding yourself with good people makes you better.
I can’t remember where I heard or read this…“You are the average of the people you spend the most time with.” Essentially, those are the people that will inspire you to be a better person, provide you with motivation to achieve your goals, empower you to make the changes you need to succeed, and cheer on your success—or not, depending on the company you keep.
My coworkers are among those I spend the most time with (the average person will spend 90,000 hours at work over a lifetime), and I have been fortunate to work with really good people. In the workplace, good people tend to be productive, caring, and generous people. My team in particular makes my departure difficult and emotional. We have worked shoulder-to-shoulder in good times and stressful times, we have laughed and cried together, and shared the joys in our lives.
They have made me a better person, and I am grateful for the gift of good company.
Saying goodbye is really hard.
403(b) and IRA contribution limits have changed
The last IRA increase was in 2013. Take advantage of these new limits to increase your retirement savings.
- The 2019 limit for the 403(b) has increased to $19,000, with the age 50 and over catch-up remaining the same at $6,000 for a total of $25,000.
- The limit on annual contributions to an IRA increased to $6,000, with the age 50 and over catch-up limit at $1,000 for a total of $7,000.
Visit weabenefits.com/limits for more information or call us at 1-800-279-4030 if you have questions.
Time to review your retirement account
You may want to:
- Increase your 403(b) contributions by completing a new Salary Reduction Agreement (SRA).
- Review and update your beneficiaries, especially if you’ve experienced any life events (marriage, divorce, birth of a child, death of a family member, etc.). It’s important to note that beneficiaries named on your retirement account supersede your will
- Update your address, review your portfolio, and rebalance your investment allocation.
Visit yourMONEY online to review your account, or call us at 1-800-279-4030.
While we talk with members about a number of retirement savings topics, there are some questions that our financial planners often hear that we’d like to share with you, along with suggestions to consider.
Remember, as a Wisconsin public school employee, you have access to our financial planning services, where you can explore these questions or others you may have.
The first time you sign in to yourMONEY to manage your retirement account(s), your login ID will be your Social Security number and your password will be your date of birth. You will then be asked to change your login ID and password before you can move forward in the site.
Visit yourMONEY to learn how to create an online account.
If I want to make both pretax and Roth (after-tax) contributions to my 403(b), do I need to open two accounts?
No. If allowed by your district, a 403(b) can house both pretax and after-tax contributions.
The answer is complex and depends on many factors, but a few basics to consider from a financial standpoint include:
- What will your monthly WRS pension benefit be?
- When do you plan on taking Social Security and what is the benefit amount?
- Do you have any post-employment health insurance benefits? If so, for how long and how much is the benefit, and how long do you need to bridge them to Medicare B at age 65?
- Do you have other investments you can access if there are income shortages in retirement?
- How will your expenses change in retirement?
For more in-depth assistance, consider taking advantage of our fee-based financial planning services. You can get a comprehensive analysis of your investment portfolio or determine whether you’re on track to meet your retirement goals. If you’re within ten years of retirement, we’ll guide you step by step using our highly focused retirement planning tool.
Member Benefits offers three different ways you can invest your funds to help meet your investment needs. These options include a target retirement fund option, “do-it-yourself” option, and model portfolio option. A few years ago, Member Benefits developed model portfolios to help reduce the fear of making poor investment choices. After completing an “Investor Suitability Profile Questionnaire” meant to determine your tolerance for risk, you can select one of the five predefined portfolios based on the results of your assessment. The model portfolios are selected from pre-vetted mutual funds offered by Member Benefits, require a small investment of time, are low maintenance, and auto-rebalance each year so your investment mix aligns with your investment goals. Learn more about our model portfolios or speak with one of our RIS Specialists for additional information about our model portfolios and other investment options available to you.
Sometimes it makes sense to keep it, and sometimes not as much. A few questions to help guide your decision include:
- Does anyone rely on your income?
- Do you want to leave a legacy behind?
- Do you have a high value estate?
- Are you still earning wages from a job or are you retired? (No need to cover income that isn’t there.)
- Would any loved ones suffer from a financial loss if you were to pass away?
According to the Social Security Administration, you can start benefits as early as age 62 or as late as age 70. You either collect a smaller amount per month over a longer period of time, or draw a larger amount per month over a shorter period of time.
One main factor to consider when making the decision is how your taxes may be affected. Social Security is not taxed on the Wisconsin income tax return, and up to 15% is not taxed on your federal income tax return.
However, if you want to wait to take your benefit and draw from pretax retirement accounts to make up the difference you could be drawing from Social Security, 100% of that will be taxable on both your federal and state income tax returns. In addition, you’ll be giving up potential growth on the funds you drew from your retirement savings accounts. Many people don’t consider this when deciding on what age to begin drawing their benefits.
Keep in mind when talking to your peers that everyone’s situation is unique, so basing your decisions on theirs may not be what is best for you in the long run. Further, Employee Trust Funds (ETF) employees are not allowed to make specific recommendations.
Fortunately for you, Member Benefits’ planners are trained and licensed to help you decide which options work best for you, and we test various options (including the accelerated method) when we do the fee-based Retirement Income Analysis for those within ten years of retirement.
How can I reduce my taxes on my required minimum distributions (RMDs) at age 70½?
Prior to the new changes in tax law, you may have deducted charitable contributions on your itemized deduction form Schedule A. However, for tax year 2018, your standard deduction might be greater than your total itemized deductions, leaving your charitable contributions “on the table,” so to speak. This means 100% of your RMD (including the amount you gave away as a charitable contribution) will be included in taxable income.
Alternatively, once you are required to start taking RMDs from your pretax retirement accounts, you could choose to have your Traditional IRA RMDs contributed directly to charity. This is known as a Qualified Charitable Distribution (QCD). The QCD is excluded from taxable income.
QCDs only apply to RMDs from Traditional IRAs. However, you may still be able to take advantage of this if you only have a 403(b), or if your spouse has a 401(k). Our financial planners can help you calculate how much you might want to rollover to a Traditional IRA that will generate a QCD equal to the amount you intend to gift each year. You will still have an RMD from your 403(b), but it will be a smaller amount.
Another option is to take your full RMD at the beginning of the year instead of at the end of the year. If you don’t need the money and are looking for a place to reinvest, consider the Personal Investment Accounts (PIAs) offered through WEA Member Benefits. By reinvesting your RMD outside of retirement accounts early in the year, growth during those twelve months would not be included in future years’ RMDs.
If you have not yet reached age 70½, we might be able to take some strategic steps now, such as Roth conversions, gifting, or distributions reinvested in a PIA to reduce your RMDs in the future. The lower tax rates passed by Congress are due to sunset in 2025. Talk to your tax advisor to determine the best action for you.
Maybe. If you want to retire before age 59½ and begin taking distributions from your 403(b) or 401(k), you will generally be subject to not only income tax, but a 10% early distribution penalty. However, the “Rule of 55” is an exception. If you leave the employer under which your retirement plan is held during or after the year you turn age 55, you are not subject to the penalty for withdrawals. If you have a retirement account with a former employer, it may make sense to move it into your current employer’s plan if you plan to use the Rule of 55.
This exception does not apply to Traditional IRAs. You have to wait until 59½. This is a word of caution should you be approached by an outside broker recommending you move your 403(b) or 401(k) to a Traditional IRA.
Take advantage of our financial planning services
- One-hour consultation*
- Portfolio analysis**
- Retirement income projection**
- Retirement income analysis**
Visit weabenefits.com/fps or call 1-800-279-4030.
*Consultation is free; however, if you choose to invest in the WEA Tax Sheltered Annuity or WEAC IRA program, fees will apply. Consider all expenses before investing. Must meet eligibility rules to participate.
**Fee-based service. Must meet eligibility rules to participate. Family members may also be eligible. Call for details. Wisconsin residency required.
Fees and services subject to change. Terms controlled by signed service agreement.
Time to review 403(b) and IRA contribution limits
The contribution limit for the 403(b) has increased from $18,500 to $19,000 in 2019. The limit on annual contributions to an IRA, which last increased in 2013, has increased from $5,500 to $6,000. If you’re not maximizing your contributions, you may wish to re-evaluate the amount you’re putting toward retirement. Not only do you lower your taxable income, you ensure that you’re doing everything you can to reach your retirement goals.
Elective 403(b) Contribution Limits
|Calendar year||Salary Reduction Contribution Limit||15 Years of Service Catch-Up||Age 50 and Over Catch-Up||Possible maximum|
For your 403(b) account, some employers only allow changes at the start of the school year and then again in January. Others allow more frequent changes. Both you and your employer will need to sign a salary reduction agreement.
Some districts may allow Roth 403(b) contributions. Your Roth contributions and your pre-tax contributions combined must not exceed the $19,000 limit.
IRA (Roth and Traditional) Contribution Limits
|Calendar year||Under age 50||Age 50 or older|
You may contribute to both a Roth and Traditional IRA, but your combined contributions must not exceed the annual limits.
If you make automatic IRA contributions using SmartPlan or through payroll deduction (available in districts offering Trust Advantage™), your contributions do not adjust automatically to meet the new limits. To make adjustments, call 1-800-279-4030 or print out an IRA Contribution Form.
If maxing out contributions is not realistic for you right now, remember: With compound interest, even a small amount invested today can grow to a large sum by retirement.
NOTE: Because the maximum Roth IRA contribution may be reduced depending on MAGI (Modified Adjusted Gross Income), some high-income taxpayers may not be able to make Roth IRA cotnributions; however, they could make Traditional IRA contributions.